GST Council Approves Rate Reductions and Trade Facilitation Measures

The 56th meeting of the GST Council, chaired by Union Finance Minister Smt. Nirmala Sitharaman, was held on September 3, 2025, at Sushma Swaraj Bhavan, New Delhi. This meeting brought forth significant changes in GST rates, relief measures for individuals and businesses, and reforms aimed at facilitating trade. Below is a detailed overview of the key recommendations and decisions made during the meeting.

A. Changes in GST Rates 

1. Goods

The Council approved several changes in GST rates across various sectors:

Food Sector:
- GST on Ultra-High Temperature (UHT) milk, pre-packaged paneer, pizza bread, and chapathi/roti reduced to Nil.
- Condensed milk, butter, cheese, and dried fruits like almonds and dates now attract 5% GST instead of 12%.
- GST on paratha and other Indian breads reduced from 18% to Nil.
Tobacco Products:
- GST on bidi wrapper leaves reduced to 5%.
- GST on bidis reduced from 28% to 18%.
- GST on unmanufactured tobacco, cigarettes, and pan masala increased to 40%.
Agriculture Sector:
- Fixed-speed diesel engines, hand pumps, drip irrigation equipment, and agricultural machinery now attract 5% GST.
Renewable Energy:
- Solar cookers, solar water heaters, and fuel cell motor vehicles now attract 5% GST.
Textile Sector:
- GST on synthetic filament yarns, sewing threads, carpets, and other textile products reduced to 5%.
Health Sector:
- GST on essential drugs and medical equipment reduced to Nil or 5%.
Consumer Goods:
- Tooth powder, candles, feeding bottles, sewing needles, and kitchenware now attract 5% GST.
Transportation Sector:
- GST on motor vehicles, motorcycles, and pneumatic tyres reduced from 28% to 18% for certain categories.
Construction Sector:
- GST on Portland cement reduced from 28% to 18%.
Handicrafts:
- GST on idols, paintings, sculptures, and other handicrafts reduced to 5%.

2. Services

Hotel Accommodation: GST reduced to 5% without ITC for units priced below ₹7,500 per day.
Air Transport: GST on non-economy class air travel increased to 18%.
Job Work: GST on job work services for pharmaceutical products, leather, and printing reduced to 5%.
Admission to Cinemas: GST reduced to 5% for tickets priced below ₹100.
Casinos and Betting: GST increased to 40%.

B. Measures for Trade Facilitation 

1. Risk-Based Provisional Refunds 

The Council recommended amendments to facilitate faster refunds:

Zero-Rated Supplies: 90% provisional refunds will be sanctioned based on risk evaluation.
Inverted Duty Structure: Similar provisions will be extended for refunds arising from inverted duty structures.

2. Simplified GST Registration 

Small Businesses: A simplified registration scheme will allow automated registration within three working days for applicants with monthly tax liability below ₹2.5 lakh.
E-Commerce Operators: A simplified mechanism for small suppliers selling through e-commerce platforms across multiple states was approved.

3. Export Benefits

The Council recommended removing the threshold limit for GST refunds on low-value export consignments, benefiting small exporters.

4. Post-Sale Discounts

Amendments were proposed to simplify the treatment of post-sale discounts, including:

Removal of pre-agreement requirements for discounts.
Reversal of input tax credit for discounts issued via GST credit notes.

C. Other Key Decisions

1. Retail Sale Price-Based Valuation 

GST valuation for pan masala, cigarettes, gutkha, and other tobacco products will now be based on retail sale price instead of transaction value.

2. Place of Supply for Intermediary Services 

The place of supply for intermediary services will now be determined based on the recipient’s location, enabling Indian exporters to claim export benefits.

3. Exemptions

Life and Health Insurance: Individual health and life insurance policies, along with reinsurance, will be exempt from GST.

D. Implementation Timeline

The changes in GST rates and reforms will be implemented in a phased manner:

Most changes will take effect from September 22, 2025.
Provisions for provisional refunds and simplified registration schemes will be operationalized from November 1, 2025.

Conclusion

The 56th GST Council meeting marks a significant step toward simplifying the GST framework, reducing tax burdens, and promoting ease of doing business. The changes aim to benefit various sectors, including agriculture, health, textiles, and renewable energy, while providing relief to the common man and small businesses. Stakeholders are encouraged to review the detailed recommendations and prepare for the upcoming changes.

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Source: CBIC, Ministry of Finance, Govt. of India

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